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Breadth Falls Below Its August Low

Many market participants and pundits have been discussing how this has been the worst start to a new year that we’ve ever hard. That’s a pretty depressing thought to begin 2016 with! Unfortunately, there are few pieces of data we have from the market to brighten the investment landscape right now.

My main focus when it comes to analyzing sectors and indices is price, momentum, and breadth. Looking at price, I noted on January 4th that for the first time since 2007 and 2008, the S&P 500 had failed when testing its 50-week Moving Average as resistance. This is important because that long-term moving average had helped ‘define’ the uptrend into the 2007 peak as well as the current bull market up trend we are (or where?) in now. When support becomes resistance, that’s a sign that the market mentality is potentially shifting.

On January 8th I tweeted a chart showing the NYSE Common Stock-Only Advance-Decline Line. This is a measure of the equity markets breadth, or amount of participation in a trend. The more stocks advancing, the higher this indicator will rise. This tool becomes important when its behavior deviates from that of the underlying market, i.e. U.S. equities. With this recent sell-off in stocks, this Advance-Decline line has fallen below its prior August low, while stocks still remain above their own respective August level.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.